WDS Career Corner: Managing Your Money Post-Residency

 

Managing Your Money Post-Residency

Special thanks to Dr. Liz Damstetter and Bryan Kuderna, CFP®, MSFS, RICP®, LUTCF® of The Kuderna Financial Team for taking the time to speak with us and provide invaluable advice for managing your finances after residency. 

What were your financial priorities as you started your career?

I aggressively paid off my student loans in big chunks as my savings allowed. I was able to pay off a 7-year consolidated loan in 3.5 years this way, despite living in a high cost of living area. I personally took this approach not because I had high interest rates, but because it was a psychological goal of mine to be debt-free after feeling years of anxiety over the student loan bills. I also invested fully in employer-matched retirement accounts and made efforts to put at least 20% of my gross income toward my retirement portfolio.

What’s the best advice you received regarding money management post-residency? 

My grandfather always said, "Pay yourself first!". To me, this meant funding retirement and building up emergency/general savings accounts and maintaining an excellent credit score by paying bills in full every month. The idea of paying your future self – just like you would pay any other bill – resonated with me.

Is there anything you would’ve done differently with your finances as you started your career? 

I would have invested small amounts sooner in a low-cost index fund. These are quite simple to fund and set on an automatic deposit. I made some very costly mistakes when investing in individual equities during residency, and I would not advise going that route while you're busy studying for boards!

What can residents do now to prepare their finances for post-residency? 

1)     Aim to read 1-2 financial books per year, starting with simple reads like the White Coat Investor. (Start this right after your boards if it's too much to take on now)

2)     If you haven't done so, start building your credit by paying off credit cards each month.

3)     Plan to keep your cost of living low the first 2-3 years out of residency-- this allows you to build up your rainy day and emergency funds and avoid "lifestyle creep".

4)     I 100% recommend that you DO buy yourself one nice post-boards present, because you deserve it!

What are 3 key financial steps for dermatologists post-residency according to a certified financial planner?

1)     Build Liquidity- with several life events likely coming up (i.e. job relocation, wedding, starting a family, buying a house, etc.) it is critical the young Attending increase their liquid savings as an emergency fund and to avoid taking on unnecessary debt. After a few months in your new role, run a detailed monthly budget, and then aim to have at least 6 months of your expenses in Savings, plus extra cash for any near-term obligations (i.e. car or home downpayment).

2)     Reevaluate Disability Insurance- you likely purchased Own Occupation coverage while in residency or fellowship, but remember, those benefits were based off of a trainee's income.  It is now time to utilize your Future Increase Options to make sure your bigger paycheck is fully protected.

3)     Understand Your Group Benefits- depending on your new role, there may be several benefits your employer offers that should be incorporated into your financial plans.  These can include Roth/Pretax 401(k) or 403(b) retirement plans with an Employer match, Health Savings Account (HSA) plans, Deferred Compensation Plans, and/or a Partnership Buy-In track.

What are 3 key financial steps for dermatology residents?

1)     Review Employment Agreement- consider having an attorney review your employment contract to understand malpractice coverage, restrictive covenants, RVU bonuses, noncompete's, sign-on bonus recapture, and other benefits or limitations.  The smaller the employer, the more flexibility you'll likely have in improving your offer.

2)     Lock in Own Occupation Disability Insurance- you've spent years building your skillset as a physician and are on the cusp of realizing the financial rewards as an Attending, it is imperative you protect your future income from illness/injury as it is the foundation of all further financial planning. You may be able to secure lifetime resident discounts before graduation.

3)     Review Student Loan Options- with your career coming into focus, it's time to revisit your student loan options.  Those with higher balances and going to work for federally qualified facilities may continue pursuing Public Service Loan Forgiveness (PSLF).  Other borrowers may look to refinance their loans for better interest rates with a private lender, or in certain situations, continue with the Fed towards a 20 or 25-year forgiveness.

 

Dr. Damstetter is the owner and founder of Reserve Dermatology & Aesthetics as well as an Assistant Professor of Dermatology at Rush University Medical Center. Bryan Kuderna is a Certified Financial Planner^TM and the founder of Kuderna Financial Team, author of What Should I Do with My Money and host of the popular business and finance podcast-- The Kuderna Podcast.